Retransmission Replies Reflect Industry Schism

June 28, 2011

WASHINGTON: Regulators have a bit of a slog ahead when they
comb through the reply comments on retransmission. Around 30 parties filed a
total of 680 pages on the Federal Communications Commission retrans proceeding in the
last few days. A quick survey of the filings suggests more of the same: Pay TV
carriers want reform; broadcasters do not.

Knology, a rural cable provider based in West Point, Ga., is in the pro camp.
Knology has 14 systems serving 39,000 subscribers, the smallest serving just
144 households.

“In the current retransmission consent market broadcast stations have
inappropriate and unfair negotiating power, knowing that if a small cable operator,
such as Knology, refuses to pay the exorbitant rates the broadcast stations
demand and thus discontinues carriage of the related broadcast programming,
viewers will likely, and swiftly, abandon that cable TV operator in favor of a
competitor,” the provider wrote in response to a filing from the National
Association of Broadcasters.

The NAB filed a 161-page reply reiterating the industry’s position--that
retrans is working and should be left alone.

“There is no factual basis in the record to support claims that the
retransmission consent marketplace is broken,” the NAB’s Jane Mago wrote.
“Allegations that the emergence of competition among MVPDs has provided
broadcasters with undue bargaining power are greatly exaggerated and
misleading. . .The mere fact that
retransmission consent fees have increased from an initial level of zero does
not mean that they are now somehow too high from the perspective of economic efficiency, or in any way the cause of the rising rates
paid by consumers for MVPD services.”

The National Football League urged the commission “not to adopt measures that
would undermine broadcasters’ ability to negotiate for fair retransmission
consent fees.” The League’s primary message was for the preservation of its
blackout policy, which came under attack by the Sports Fan Coalition. The NFL’s
blackout rule allows it to prohibit the broadcast of a game in a home market.
The idea is to get people into the stadium. The SFC ask the commission to waive
the sports blackout rule when retrans agreements expire. The League said that
waiving the rule would give cable and satellite operators “excessive leverage”
in retrans negotiations, because they feasibly could carry a game telecast
themselves.

John Hane, a media attorney with Pillsbury Winthrip Shaw Pittman LLP says much
of the arguments are off target. Retrans policy was set by Congress. The FCC’s
directive is to make sure negotiations are done in “good faith.” It is
therefore incumbent upon cable and satellite operators to demonstrate negotiations
not so conducted, which they have not done, Hane said.

“Any reform of the good-faith bargaining rules, or imposition of any new
regulations on broadcasters intended to skew the market for retransmission
rights, must be based on fact, not self-serving rhetoric and generalized,
undocumented characterizations,” Hane wrote in comments filed for LIN
Television. “MVPDs have not provided any evidence whatsoever showing that the
exceptionally few service disruptions that occur result from bad faith bargaining
or that retransmission fees are too high by any objective measure. Any new
rules based on the record now before the FCC would necessarily be arbitrary and
capricious.”